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KARACHI: Large Taxpayers Unit (LTU), Karachi has “detected” a whopping Rs 200 billion revenue leakage in the financial ledgers of 29 sugar mills during audit.

According to the sources, the large tax collecting arm of Federal Board of Revenue (FBR) has initiated audit exercise of 29 sugar mills for last four financial years after observing suppressed sales and suspicious business transactions.

They said that the LTU Karachi had carried out over 120 audits in income tax and around 100 sales tax audits of which over 50 cases had been disposed of by December 2020, despite stay orders by Sindh High Court (SHC). As a result, a whooping revenue leakage of over Rs180 billion has been detected in income tax while the rest of the tax evasion was noticed in sales tax.

Furthermore, the sources anticipated that the tax department would raise the total tax demand of over Rs. 500 billion against these sugar mills if the stay orders were vacated. Replying to a question, sources said the audits were conducted in the light of sugar commission report besides the LTU Karachi also obtained the relevant information from banks, cane commissioner, Pakistan customs, Security Exchange Commission of Pakistan and others and utilized the same that led the discovery of Rs. 200 billion revenue leakages.

To another question, sources replied that the sugar production was more than the domestic demand, which was 5.3 metric ton but the sugar mill owners in connivance with the Benami investors, who might be a relative or a family member of the mill owners, monopolized the demand and supply chain of the said commodity, creating artificial demand in the market that left the consumers with no option but to buy the commodity at high price.

Elaborating the modus operandi of the sugar mill owners, they said that the Benami investors bought sugar in bulk during crushing season at low prices and hoarded the same at sugar mills and controlled the sales to create artificial demand, resulting increase in sugar price.

“During audit, it was found that the sugar mills owners are operating multiple bank accounts and keep transferring funds from one to another to conceal the inflow and outflow of funds,” sources said. The tax department during audit also found multiple unexplained credit entries of bank statements, which were higher than the sales declared by the sugar mills; they said and added that these sugar mills sold over 90 percent of stock to the unregistered persons. In addition, the LTU, Karachi also detected serious discrepancies in the subsidy received by the sugar mills from provincial and federal governments, sources said and added that the sugar mills owners appeared feckless to clarify their position when they were asked to satisfy the department in the issues related to the verification of exports to Afghanistan, advance from customers, missing stock, suppression of sales, suppression of production, etc. Sources informed that after the deployment of tax officers at sugar mills to monitor the daily production, substantial increase in crushing and production were observed as compared to the figures reported last year.

In response to a query, the sources stated that the LTU Karachi started collecting bank statements of ongoing tax period and reconciling it with monthly sales tax return and daily production report in order to avert all malpractices, which were done in past to control the market price of the sugar.

Copyright Business Recorder, 2021